Intellectual Property Litigation

Andy Warhol once famously commented that “In the future everybody will be world famous for fifteen minutes."  For trademarks, fifteen minutes of fame is not sufficient to assert a trademark dilution claim. The timing of when a mark first became famous and how long that fame must endure was the subject of a recent decision by the Trademark Trial and Appeal Board in TiVo Brands LLC v. Tivoli, LLC.  In a precedential opinion, the Board held that to prevail on a dilution claim in an opposition proceeding, the opposer’s mark must have become famous before applicant’s first use of its mark and the mark must continue to be famous at the time of trial in the proceeding. The TiVo case involved applications by Tivoli to register the marks TIVOTAPE and TIVOBAR for lighting fixture products, alleging a date of first use of May 2010 for TIVOTAPE and September 2015 for TIVOBAR. TiVo opposed registration on the grounds of both dilution by blurring and likelihood of confusion, relying on registrations for its TIVO mark for DVR products and related services and merchandise, as well as two TIVO composite marks. Analyzing the dilution claim in detail, the Board confirmed established precedent that TiVo was required to prove its mark had become famous before Tivoli’s first use of TIVOTAPE in May 2010. This was amply demonstrated by revenues generated and advertising and publicity disseminated by the company for TiVo products and services over many years. The Board put significant emphasis on unsolicited media attention for the TIVO mark, holding that “it is this third-party recognition of the mark that tips the balance in favor of our finding that Opposer’s TIVO mark is famous for dilution purposes.” The evidence included clips of Hillary Clinton on The Late Show with David Letterman in 2008 stating that” the #6 reason she loves America is TIVO”; Anderson Cooper on Ellen in 2007 saying “Forget the Internet, for me TIVO is the greatest technological revolution;” and Oprah in 2006 giving everyone in the audience a TIVO DVR. Based on all of the evidence and factors bearing on fame of the mark, the Board held that “public recognition of the mark from at least as early as 2002 was widespread” and by 2010, TIVO had become a “household term” with which almost everyone was familiar. But the Board did not stop there. It then considered “whether a plaintiff alleging dilution must further show that its mark is still famous at trial, when defendant’s rights are being determined.” Perhaps accounting for why the opinion was designated “precedential”, the Board stated it had encountered no precedent, and the parties had not cited any, addressing this additional inquiry. It ultimately determined that such an additional requirement exists, it looked to the statutory language on dilution claims in Section 43(c) of the Lanham Act, noting that a plaintiff must show that its mark “is”  famous (emphasis in original).  In addition, the statue permits only the “owner of a famous mark that is distinctive, inherently or through acquired distinctiveness” to bring a dilution claim. “Accordingly, unless the plaintiff owns a famous mark at the time it brings the claim, and by extension, retains its fame through trial, this provision of the statute cannot be satisfied …. To find otherwise would allow a mark that has lost its fame to continue to enjoy the widest penumbra of protection available accorded by the extraordinary protection of the dilution statute. This approach also accounts for any significant changes in the marketplace between the date of Applicant’s first use of its mark and trial.” The Board concluded that the TIVO mark remained famous and inherently distinctive and was sufficiently similar to TIVOTAPE and TIVOBAR such that applicant’s marks would impair the distinctiveness of the TIVO mark. Because the Board sustained TiVo’s opposition on the ground of dilution, it did not reach the merits of the likelihood of confusion claim. As a practice tip, if your company’s brand has well-established and continuing fame, it’s helpful to remember to introduce evidence of such fame through the time of trial. Conversely, if your company is defending against a dilution claim based on a brand that has declined in popularity, it may be fruitful to argue that fame has not continued to exist through trial. In a fast-paced brand and media culture where brands might live a short life and die quickly, it could be a productive strategy.

The NFL playoffs are underway and teams and their fans are riding high: eight teams still have a chance of making the Super Bowl. Now could be the perfect time to protect the team slogan or motto that fans will love for years to come. But seven out of the eight teams will not win the Super Bowl this year. If they file a trademark application, it could set them up for ridicule. During last year’s playoffs in January of 2018, the Minnesota Vikings, riding a wave of fervor after a last-minute win over the New Orleans Saints, applied to register the phrase "Bring It Home" to describe their attempted push to the Super Bowl. But when an embarrassing loss to the Eagles ended the Vikings' playoff run a few weeks later, the Vikings faced ridicule for rushing to grab a now-tarnished slogan. The New England Patriots found themselves in a similar situation in 2008, when they applied to register the trademark “19-0,” a reference to the perfect season they would’ve had if they’d won the Super Bowl. The application was rejected. Even worse, the Patriots lost to the New York Giants a few weeks later. The loss prompted the New York Post to file snarky trademark application for “18-1,” and merchandise mocking the Patriots’ aspirational slogan sprung up across the web. On the other hand, a good idea can be worth protecting, even if initially attempting to register it can be a little awkward. NBA Lakers coach Pat Riley registered the term "three-peat.” Unfortunately, the Lakers never quite managed to rise to the term. But the Chicago Bulls did, and made good use of the term. Riley pocketed approximately $300,000 in royalties for its use. “Three-peat” or no, Riley will be laughing all the way to the bank. For companies beyond the gridiron, filing a trademark application at the right time is essential to protecting their company's valuable brand assets, but it is still wise to anticipate how the public may react. In 2015, Zodiac Seats France filed a patent for an awkward new aircraft seat design that switched the middle seat to face away from the front of the plane in order to pack more seats onto the plane. Passengers would awkwardly face one-another in the cramped quarters of an aircraft’s economy cabin. When the patent was roundly ridiculed, Zodiac found itself in a position only slightly less awkward than having to suffer a flight in one of its newly-designed middle-seats. Ultimately, when it comes to publicly-available IP filings, teams and companies must be aware of the publicity—good or bad—that the filings may generate. And who knows... maybe someday the Vikings will Bring It Home after all.

If you were shopping for snack crackers and saw Cheez-It packages that looked like the ones shown here, how much whole grain content would you think the crackers contain – a little, a lot, all of it?            The Second Circuit recently considered this question in Mantikas v. Kellogg Company, holding that the plaintiffs had “plausibly alleged that a reasonable consumer would be misled by Defendant’s whole grain labels to believe that the grain in whole grain Cheez-It crackers was predominantly whole grain.” On the package shown above at left, the words “WHOLE GRAIN” were featured in large print on the front panel, and “made with 5g of whole grains per serving" appeared in smaller print on the bottom. The second version on the right displayed the words “MADE WITH WHOLE GRAIN” in large print on the front panel, with "made with 8g of whole grain per serving” in smaller print on the bottom. Both versions contained a “Nutrition Facts” section on the side panel of the cracker package, revealing in small print that a serving size of the crackers was 29 grams, and an ingredients list in which the first-listed ingredient was “enriched white flour.” Whole wheat flour was also listed as either the second or third ingredient, included in order of ingredient predominance as required by federal regulation. Plaintiffs asserted claims for false advertising and deceptive business practices under state consumer protection laws, based on the theory that they were misled into believing that the Cheez-It crackers were made “predominantly” from whole grain. On Kellogg’s motion to dismiss, the district court dismissed the claims, holding that neither version of the Cheez-It packages would mislead a reasonable consumer because both “WHOLE GRAIN” and “MADE WITH WHOLE GRAIN” were true statements, qualified by further accurate language about the number of whole grain grams per serving. The Second Circuit vacated the decision and remanded the case for further proceedings. The appellate court began its analysis with the oft-cited principle in false advertising cases that “context is crucial.” Here, that meant a consideration of the Cheez-It packaging as a whole, including disclaimers and qualifying language. The court determined that while disclosures on the front of the box accurately stated the amount of whole grain per serving, “they are nonetheless misleading because they falsely imply that the grain content is entirely or at least predominantly whole grain, whereas in fact, the grain component consisting of enriched white flour substantially exceeds the whole grain portion.” Moreover, the information conveyed in the Nutrition Facts and ingredient lists for the products did not cure the deceptive aspects of the packaging. As the court explained, “reasonable consumers expect that the ingredient list contains more detailed information about the product that confirms other representations on the packaging” (emphasis in original). Consumers “should not be expected to consult the Nutrition Facts panel on the side of the box to correct misleading information set forth in bold type on the front of the box.” The court distinguished a case cited by Kellogg in which crackers labeled as “made with real vegetables” was held to be not misleading because most reasonable consumers would know that crackers are not composed primarily of fresh vegetables. In contrast with respect to the Cheez-It crackers, reasonable consumers would likely understand that crackers are in fact typically made predominantly with grain, and would therefore look to the “bold assertions” on the front of the packaging “to discern what type of grain” the crackers contain. In concluding its analysis, the Second Circuit rejected the general proposition that it is acceptable to state that a product is made with a specific ingredient so long as that ingredient is in fact present in the product. According to the court, that would “validate highly deceptive advertising and labeling” and permit a marketer to advertise the presence of an ingredient in product labeling so long as there was “an iota” of that ingredient in the product. The TMCA will continue to follow and report on any significant new developments in the decision. For now, if you’re a product marketer, be careful of relying on fine print and side panel explanations to avoid false and misleading impressions created by prominent labeling claims, especially where the fine print is inconsistent with bold claims featured on the front panel of product packaging.

On Friday, while some of us may have been muttering a few bad words as we slogged through our post-holiday inboxes, the Supreme Court was toying with a naughty word of its own:  FUCT.  That’s right.  Late last week the Court agreed to hear a case involving a rejected trademark application for the word “FUCT” for use on clothing.  It’s an interesting case and one that we will be keeping a close eye on in 2019. Here’s the basic gist of the dispute:  Erik Brunetti is an L.A. based artist and clothing designer who launched a streetwear apparel brand under the rather colorful name “FUCT.”  He attempted to register the trademark with the USPTO.  The examiner rejected the application and cited the Lanham Act prohibition regarding registration of “scandalous” trademarks under Section 2(a).  The applicant appealed to the U.S. Court of Appeals for the Federal Circuit.  To virtually no one’s surprise, the Federal Circuit held the “scandalous” prohibition violated the First Amendment under Federal Circuit and Supreme Court precedent, including the unanimous 2017 Supreme Court decision Matal v. Tam that struck down the “disparagement” prohibition also contained in Section 2(a).   The USPTO petitioned for the U.S. Supreme Court to review the decision, and the Court obliged.  WTF?   We will soon find out why the Court is jumping back into the fray of Section 2(a), but we offer a few musings for your consideration: This could signal that the Court wants to clarify or modify the constitutional analysis it previously set forth in Matal v. Tam. Or, it could be that the Supreme Court sees a principled difference between the “disparaging” and “scandalous” provisions within the same statutory section.  Neither possibility seems likely, though.  Matal v. Tam was a unanimous decision from 2017, so it wouldn’t seem as though the Court would be all that interested in examining its decision anew given that the ink is barely dry on it.  Further, many scholars and Lanham Act pundits see no meaningful difference between the two provisions of the Lanham Act.  If one falls, they both fall. If the Court upholds the Federal Circuit decision, we may see a glut of profane and sexually explicit trademark applications filed at the USPTO, which is what the government appears to be concerned about and why it wants the Federal Circuit’s decision reversed. The government’s position seems to be a bit like a solution in search of a problem.  Yes, there may be some that will file vulgar trademark applications.  But trademarks are registerable only if they are used to sell goods or services in commerce.  While vulgar and/or sexually explicit trademarks may appeal to a slice of the overall consuming population, it seems unlikely that such trademarks are going to catch fire and live in mainstream commerce. The government further argues that “international bodies” (such as foreign countries) will look askance at the U.S. for it allowing “scandalous images and terms” being registered as trademarks. Given the current state of play of our geopolitics, offending foreign countries about what’s happening at our U.S. Trademark Office should probably rank pretty far down on the government’s priority list. We will be keeping our eyes (and especially our ears) open.

A lesser-known feature of selecting a TRUMP-branded property as a wedding venue is that the President himself may decide to crash your wedding. It also may end up leading to a substantial copyright law development, specifically regarding the fair use doctrine and photographs posted to social media. Trump’s crash at the Trump National Golf Club in New Jersey in June of 2017, was exposed by wedding attendee Jonathon Otto via his amateur iPhone photograph of the newsworthy moment. Otto took a photo of Trump and the bride and then texted his photo to one friend. The next day his photo appeared in articles across the country, including on outlets such as TMZ, CNN, the Washington Post, the Daily Mail, and Esquire. The publications swiped the photo from another wedding attendee’s personal Instagram account. Having indicated to a friend that he “wanted [his] cut” from the attention garnered by his photo, Otto registered the photo with the Copyright Office and brought infringement suits against five media companies who published his photo without permission. Four media companies have since settled with Otto. Otto’s suit against Hearst Communications, Inc., owner of Esquire Magazine, is ongoing in the Southern District of New York, but a recent ruling may be a substantial new development in U.S. Copyright law. U.S. District Judge Gregory H. Woods entered an Opinion and Order granting summary judgment in Otto’s favor on the issues of infringement and fair use. The court’s infringement analysis was over in a flash. The court concluded that Otto has a valid, registered copyright in the photo. Hearst did not dispute actual copying or substantial similarity of the photos. Thus, the court easily concluded Hearst infringed Otto’s copyright. The court then addressed Hearst’s defense of fair use, and on cross motions for summary judgment, the court again sided with Otto. Fair use is an affirmative defense to copyright infringement that permits the unauthorized use of a protected work for certain purposes. Notably, “news reporting” is one of a number of statutorily-enumerated purposes. However, according to Judge Woods, an entity’s status as a news publication “does not render that entity immune from liability under intellectual property laws.” To determine whether the use of another’s copyrighted work is fair use, courts look to four statutory factors: (1) the purpose and character of the use; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. In this case, the court concluded that factors one, three, and four weighed in favor of Otto, while only factor two, the nature of the copyrighted work, favored Hearst. According to the court, Hearst’s use of Otto’s photo was commercial. Online readers could view the photo (and corresponding article “President Trump is the Ultimate Wedding Crasher”) online at Esquire for free, but Hearst earned revenue from advertisements displayed with the article. Further, the court did not consider Hearst’s use of Otto’s photo to be transformative because the photo is merely used as an “illustrative aid” and “depicted the subjects described in the articles.” As the court stated, “[s]tealing a copyrighted photograph to illustrate a news article, without adding new understanding or meaning to the work, does not transform its purpose—regardless of whether that photograph was created for commercial or personal use.” Favoring Hearst, the court determined that the photo was factual in nature, not expressive or creative. The law recognizes a greater need to disseminate facts than to disseminate fantasy. However, Hearst essentially used the entire photo, and Hearst’s publication potentially harmed Otto’s reasonable financial opportunities in the market for licensing the photo for publication and use in derivative works. The court noted that a creator “should not be precluded from future profits should they lack the marketing prowess to capitalize on the work at the time of creation.” Hearst’s publication of the viral photo essentially destroyed the primary market. Finally, the court explained that allowing a publisher to poach an image from an individual’s social media account for an article that does little more than describe the setting of the image does not promote “the Progress of science and the useful Arts,” one of the bases of the fair use defense in furthering the mission of copyright law. According to the court, if Hearst was permitted to use Otto’s photo without authorization by relying on the fair use defense, “amateur photographers would be discouraged from creating works and there would be no incentive for publishers to create their own content to illustrate articles: why pay to create or license photographs if all personal images posted on social media are free grist for use by media companies, as Hearst argues here?” In concluding its fair use discussion, the court emphasized the “fact-driven nature” of the fair use inquiry. This cautious language highlights the uncertain impact of this opinion upon other similar cases “involving personal photographs used by the media[.]” Whether this ruling will be upheld by appellate courts or applied in other circuits also remains to be seen. A jury will ultimately decide whether Hearst acted willfully in infringing on Otto’s copyright (the trial date has not yet been set). Otto’s willfulness arguments are based on the media conglomerate’s long history of photography licensing and previous charges of copyright infringement. While the court found that a reasonable jury could differ on the issue of willfulness, and thus denied summary judgment on the issue, the court also cautioned that “it is not clear to this Court that an entity’s status as a media publisher alone can establish a reckless disregard for the copyright holder’s rights.” The TMCA will continue to update you with the latest developments in the case and the effects this decision has on future reliance on the fair use defense.

As we previously reported on our blog, the doors to the public domain will open in the United States for the first time since 1998.  On January 1, 2019, any works published in the United States in 1923 or prior are freed from the shackles of copyright protection and can be copied, remixed, distributed, etc. without authorization from the copyright owner. According to some brief internet research, 1923 saw the following cultural highlights, to name just a few: Louis Armstrong made his first studio recording Two iconic sports stadiums opened: the original Yankee Stadium in New York and the original Wembley Stadium in the United Kingdom The Hollywood Sign in California was inaugurated The Walt Disney Company was formed The film “The Ten Commandments” was released (** Cecil B. DeMille’s silent film version, not the version starring Charlton Heston that was released in 1956) Robert Frost’s “New Hampshire” poetry collection was published, which includes “Stopping By Woods on a Snowy Evening” William Carlos Williams published the poetry collection “Spring and All,” which includes “The Red Wheelbarrow” So, why has the public domain been effectively sealed in the United States for over 20 years? When the 1976 Copyright Act became effective on January 1, 1978, the term of copyright was set at life of the author plus 50 years.  The term for works created before January 1, 1978, was 75 years (though the blogger notes that calculating the term of protection for pre-1978 works can be complicated and not all works benefited from such a lengthy term based on a number of circumstances, the discussion of which is beyond the scope of this post).  Hence, as the late 1990s drew near, key players in the United States entertainment industry (including Disney, Time Warner, Universal, and Viacom) started recognizing that works created in the 1920s would soon lose copyright protection.  A notable oft-cited example in copyright lore is Walt Disney’s “Steamboat Willie” cartoon that was copyrighted in 1928 and would have entered the public domain on January 1, 2004. These industry giants convinced Congress to extend the term of copyright protection for an additional 20 years.  This extension is known as the “Sonny Bono Copyright Term Extension Act,” named after Sonny Bono, because he was one of the original sponsors of similar legislation and passed away nine months before the bill was signed into law by President Clinton on October 27, 1998.  The effect of the term extension is generally as follows: For works created on or after January 1, 1978, the term is life of the author plus 70 years. For works made for hire and anonymous or pseudonymous works, the term is 95 years from publication or 120 years from creation, whichever comes first. For works created prior to January 1, 1978, and still under protection, the term is 95 years from the original copyright date. This means the first depiction of Mickey Mouse in a sound cartoon enters the public domain on January 1, 2024.  Will we see lobbying efforts to keep Mickey locked safely away in the “Disney Vault” for an additional term of protection?  Only time will tell, but if it happens, you can rest assured that we will be writing about it here at The TMCA.

In a decision issued on December 12, 2018, the Second Circuit refused to recognize application of the first sale doctrine to a service that had been established as a marketplace for resale of digital music files.  Under the first sale doctrine (set forth in Section 109(a) of the Copyright Act), owners of legally-obtained copies of copyrighted works can resell those copies without violating the rights of the copyright holder.  This is the reason we have stores and websites that focus on the sale of secondhand books, CDs, and other physical media. The Second Circuit’s case involved ReDigi, which was an internet platform established in 2009 to allow the resale of digital music files that had been lawfully purchased on iTunes.  The ReDigi platform featured a mechanism for effecting transfer of a seller’s digital music file so that once the file was transferred to ReDigi’s server, it would be deleted from the uploader’s device.  According to ReDigi, its software ensured that there was never a complete version of the digital music file in two places at the same time.  The process would then be replicated to transfer the file from ReDigi’s server to a buyer’s device.  ReDigi’s software also continuously monitored an uploader’s computer and connected devices to detect duplicate files.  If duplicate files were found, ReDigi could suspend a user’s account. Capitol Records, Capitol Christian Music Group, and Virgin Records sued ReDigi for copyright infringement in 2012.  The district court for the Southern District of New York found in favor of the plaintiffs and awarded $3.5 million in damages.  In affirming the judgment, the Second Circuit concluded that ReDigi’s service violated the copyright owners’ exclusive rights of reproduction under the Copyright Act. In an opinion authored by Judge Pierre Leval, the Second Circuit acknowledged that ReDigi was acting in good faith in developing its platform, and was “not making efforts in the shadows to infringe on copyrights.”  The key problem for the court is that the first sale doctrine as codified in the Copyright Act relates to distribution of copyrighted works and not to reproduction of those works.  Accordingly, because the Second Circuit determined that the ReDigi platform creates a reproduction of the music file, the first sale doctrine was inapplicable.  Despite ReDigi’s argument that its technology ensured the complete music file never existed in two places simultaneously, the court concluded that “each transfer of a digital music file to ReDigi’s server and each new purchaser’s download of a digital music file to his device creates new [copies].”  The court also seemed particularly concerned that there would be no way to ensure the seller of a music file did not retain a copy.  For example, if a user had copied the file to an external hard drive prior to uploading the file to ReDigi’s server and the user never again attached the external hard drive to the user’s computer, ReDigi would not find the duplicate copy. The Second Circuit did not, however, shut the door completely on application of the first sale doctrine in the digital context, acknowledging that “other technology may exist or be developed that could lawfully effect a first sale.”  The court posits that a person could place digital song files on a thumb drive and sell the thumb drive and it also cites William Patry’s copyright treatise for the observation that the first sale doctrine would permit sale of an iPod that contains lawfully made digital music files.  (In the author’s opinion, neither of these options addresses the court’s key holding that the first sale doctrine is inapplicable when reproduction of the digital music files is involved.  In fact, both of the examples given by the court most likely involve a reproduction of the file before the sale occurs.  In the thumb drive example, unless the owner originally downloaded the song files directly to the thumb drive, the act of placing the songs on the thumb drive before selling the songs requires reproduction of the song files.  Likewise, the typical manner in which users transfer songs to their iPods (or now, more likely, their iPhones) is to download the songs from iTunes onto their computer or an external hard drive and then to upload them onto the iPod.  Hence, the digital sound files residing on the iPod to be sold may very well be reproductions of the originally-purchased file.  If either the flash drive or the iPod were to be sold containing these reproductions, then the first sale doctrine cannot be applied.  However, if the original song owner were to sell his or her hard drive where the songs all were originally downloaded, this sale would presumably be within the first sale doctrine under the court’s reasoning.) Turning back to the Second Circuit’s analysis, the court also held that ReDigi’s actions did not amount to fair use under test set forth in Section 107 of the Copyright Act, because the copying of the files was not transformative and essentially replaced the copyright owner’s marketplace for selling digital music files. Finally, in closing the opinion, Judge Leval issues the time-honored sentiment that can be found in federal court opinions throughout history and across all areas of law:  If you have persuasive arguments to support a change in the law, then lobby Congress to codify those changes in statute, because the court cannot “substitute our judgment for that of Congress.”

American Airlines recently scored a major win by convincing the Copyright Office to reverse its refusal of an application to register the “American Airlines Flight Symbol.” American Airlines reached its final destination after overcoming myriad delays.  The Copyright Office rejected American Airlines’ copyright application three times on the ground it did not contain a sufficient amount of original and creative artistic or graphic authorship to support a copyright registration.  According to the Copyright Office, it receives half a million applications annually, but only declines to register less than 20,000 on this basis.  First, a Copyright Office Registration Specialist refused registration; second, an Attorney-Advisor for the Copyright Office denied American Airlines’ First Request for Reconsideration; and third, the Copyright Office Review Board denied American Airlines’ Second Request for Reconsideration.  In fact, the Review Board noted that “the Work falls just below the threshold for creativity required by the Copyright Act.”  With no other options left, American Airlines filed a lawsuit seeking judicial review of the decision under the Administrative Procedures Act (“APA”).  The complaint referenced widespread disapproval of the decision amongst copyright practitioners, including an informal poll during a June 2018 meeting of the Copyright Society of the USA.  In a presentation by Karyn Temple, the Acting Register of Copyrights, she asked an audience whether anyone agreed with the refusal.  Apparently, no one raised their hand and then, according to the complaint, Ms. Temple conceded, “I think the main drafter of that one actually even kind of regrets that decision.”  Only one month after it filed the complaint, American Airlines dismissed the suit, reporting that the Copyright Office had agreed to again review its refusal of the work. After conducting an additional review of the design, the Copyright Office has now reversed its three prior refusals of the application finding that the work does indeed contain the requisite level of creativity.  So, why the change?  The decision purportedly hinges on American Airlines’ submission of a higher-quality image of the work showing “additional detail that had not been clear from the original deposits.”  With this new version of the design, the Copyright Office Review Board found a number of elements showing sufficient creativity, including an “aircraft tail element [that] is oriented on an angle,” a “bird-head element [that] hovers just below the center of the aircraft tail element” with a “three-dimensional appearance that causes the bird-head element to appear to be above and separated from the aircraft tail,” and multiple colors with different gradients and shading “further heightening the illusion of depth.”  Notably, the Board limited American Airlines’ level of protection by stating that “the resulting protection is thin, protecting only the Work’s original and creative elements ‘against only virtually identical copying.’”  Interestingly, at least to our eyes, the original deposit copy of the work is not all that different than the higher-quality version that apparently swayed the Copyright Office.  The shading, gradients, and bird-head elements are all visible. The Board also took pains to indicate that “there are no third requests for reconsideration,” despite the upgrade it afforded American Airlines.  It also stressed that all decisions by the Copyright Office are made on a case-by-case basis and other applicants should not expect the Board to conduct such additional screening when applications are rejected. So what can your brand learn from this victory in the sky? Submit the highest quality images you have when applying to register logos with the Copyright Office. When you have a two-dimensional logo that contains shading and features that give the work depth, make sure to point that out on a First Request for Reconsideration. If your logo consists of a combination of geometric shapes and suggestive elements that may not be readily discernable, explain those elements to the Copyright Office in a First Request for Reconsideration. While the Copyright Office claims, that “the symbolic meaning or impression that a work conveys is irrelevant to whether a Work contains a sufficient amount of creativity,” this decision suggests otherwise. The Copyright Office is not interested in a work’s public reception or the author’s intent, so don’t expend resources providing evidence of these points to the Office. In the decision, the Copyright Office also included a reminder that “the Office does not consider the time and effort used in creating a design, its novelty, aesthetic appeal, or commercial value.” It remains to be seen if others will try to leverage similar outcomes by seeking review under the APA, especially in light of what appears to be a recent trend of the Copyright Office refusing company logos on the ground they lack creativity.  In the meantime, American Airlines will be sipping champagne in first class by itself.

Long ago (by internet standards), a spoof of Discovery Channel-style nature videos went viral. “The Crazy Nastyass Honey Badger” is a three-minute montage of wild honey badgers running across the desert, hunting prey, and, perhaps most disgusting, eating a snake, all set to classical music. The narrator, Christopher Gordon, describes the honey badgers’ activities without resorting to “science-y” language, saying things like “watch it run in slow motion”; “watch it dig, look at that digging,” and “it doesn’t care about being stung by bees, nothing can stop the honey badger when it’s hungry.” Gordon’s patter drove the video to more than 89 million views on YouTube. Gordon repeatedly tells the viewer “honey badger don’t care,” “honey badger don’t give a s- - -,” and more vulgar variations. After the internet-consuming public went nuts for honey badgers, Gordon obtained federal trademark registrations for “Honey Badger Don’t Care” for audio books, greeting cards, mugs, clothing, Christmas products, and similar goods. Gordon licensed the mark for honey badger costumes, toys, apparel, posters, and other products. Gordon also licensed the phrase for greeting cards, leading to heartfelt birthday greetings like, “Honey Badger Don’t Care About Your Birthday.” (Gordon never registered “honey badger don’t give a s- - -”). Around the same time, Drape Creative, Inc. and Papyrus-Recycled Greetings, Inc. started developing their own honey-badger themed greeting cards. Their products doubled down on the “honey badger don’t give a s- - -” phrase, featuring it on Election Day, birthday, and Halloween cards. Drape Creative’s president drafted the cards. He later testified that he did not recall what inspired his designs and that he had never heard of a video involving a honey badger. Gordon sued in 2015, alleging trademark infringement under the Lanham Act and other claims. The district court entered summary judgment for the defendants, concluding the First Amendment protected their products. Gordon appealed, and the Ninth Circuit reversed. The appellate court applied Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989), which modifies the two-element likelihood of confusion test for trademark infringement claims to protect freedom of expression. Usually, a trademark plaintiff only need prove that it has a valid, protectable mark and that the defendant’s use of the mark is likely to cause confusion. Under Rogers, the Lanham Act applies to an expressive work only if a defendant’s use of a protected mark (1) is not artistically relevant to the work, or (2) explicitly misleads consumers as to the source or content of the work. To invoke the Rogers test, a defendant must make a threshold showing that its allegedly infringing use is part of an expressive work protected by the First Amendment. The plaintiff must then prove at least one of the Rogers criteria in addition to the two Lanham Act elements. The Ninth Circuit easily concluded that Gordon had failed to prove the first Rogers criterion—the honey badger phrases used in the greeting cards were the punchlines on which the cards’ humor turned. The second Rogers criterion gave the court pause. In all of its previous decisions applying Rogers, the court had held that the First Amendment protected the accused use. The court decided, however, that this case demonstrated Rogers’ “outer limits.” The court sought to clarify the “explicitly mislead” requirement, while ensuring it remained harder to satisfy than the usual likelihood-of-confusion element of a Lanham Act claim. The court held that an affirmative misleading statement of the mark holder’s sponsorship or endorsement it not required to run afoul of the Rogers test. But, the court continued, use of a mark alone might explicitly mislead a consumer if consumers would ordinarily identify the source of the product by the mark itself, and the junior use was sufficiently similar to the senior use of the mark to create confusion. The court contrasted the honey badger cards with earlier works found to be protected by the First Amendment. Those included the song “Barbie Girl” by the Danish band Aqua, a 1997 pop hit that parodied values the songwriter associated with Barbie dolls. (Despite pre-dating YouTube, “Barbie Girl” is vastly more popular than the honey badger video, garnering more than 568 million views.) The court also distinguished the use of a name similar to that of a trademark-protected name for a club in East Los Angles in the video game Grand Theft Auto: San Andreas. The court said these junior users utilized the marks in different ways than the senior user—no one would think Mattel produced the “Barbie Girl” song, nor would anyone think a sophisticated video game originated from a small Los Angeles club. The appellate court decided there was a jury question as to whether use of the phrase “honey badger don’t give a s- - -” was explicitly misleading. Defendants’ use of the phrase without other text and evidence that consumers rely on marks inside of cards to identify their source both suggested the explicitly misleading criterion was satisfied. A jury could conclude defendants used the phrase in the same way Gordon did on his greeting cards and added minimal artistic expression, leading to liability. On the other hand, the court noted that the defendants used slight variations on the phrase and included their website on the back of the cards, which could lead a jury to find in their favor. The case now goes back to the trial court. Absent settlement or a loss on other grounds, one federal jury will be lucky enough to enjoy (or endure) an amusing take on wild honey badgers, their athletic and eating habits, and what it all means for the sale of greeting cards.

Avid readers or this blog know that the FTC spends as much time on Instagram and other social platforms as your favorite millennial, but who knew that the SEC also spends it’s working hours perusing posts on popular social media sites looking at influencer advertising? Now, you do. Late last month, the Securities and Exchange Commission announced a settlement with DJ Khaled and Floyd Mayweather Jr. for failing to disclose payments they received for promoting Initial Coin Offerings, known as ICOs, on their social media accounts. Mayweather was paid some $300,000 by three separate ICO issuers to promote the crypto currencies, while DJ Khaled was paid $50,000 by a single issuer.  The pair made Instagram, Twitter, Facebook and YouTube posts promoting the ICOs to their millions of followers, but failed to make any mention of their status as paid influencers.  As we’ve told our loyal readers over the years, the FTC Endorsement Guides are pretty straightforward on this subject: if there is a ‘material connection’ between an endorser and the marketer of a product – in other words, a connection that might affect the weight or credibility that consumers give the endorsement – that connection should be clearly and conspicuously disclosed, unless the connection is already clear from the context of the communication containing the endorsement. Material connections could consist of a business or family relationship, monetary payment, or the provision of free products to the endorser. Section 17(b) of the Securities Act also requires such disclosures, but the SEC takes it a bit further.  In particular, the Act makes it unlawful to promote the sale of any securities "without fully disclosing the receipt, whether past or prospective, of [any received] consideration and the amount thereof." (emphasis added). SEC Enforcement Division Co-Director Stephanie Avakian noted that “with no disclosure about the payments, Mayweather and Khaled's ICO promotions may have appeared to be unbiased, rather than paid endorsements.” Enforcement Division Co-Director Steven Peikin also noted that “investors should be skeptical of investment advice posted to social media platforms, and should not make decisions based on celebrity endorsements.” Mayweather agreed to pay $300,000 in disgorgement, a $300,000 penalty and $14,775 in prejudgment interest, while DJ Khaled agreed to pay $50,000 in disgorgement, a $100,000 penalty and $2,725 in prejudgment interest. They also agreed not to promote any securities on social media or otherwise for a few years.  And you thought the FTC’s settlement agreements for failing to disclose material connections were tough! So what can you take away from these settlements? Brands and influencers are responsible for making sure that material connections, including payments to influencers, are properly disclosed.  If the product is a security, check the Securities Act – your disclosure obligations go a bit further than #Ad and require full disclosure of the amount of money involved.

On January 14, 2019, the Supreme Court is set to hear oral argument in the copyright dispute Oracle USA Inc. v. Rimini Street, Inc.  The Court will provide guidance on the proper definition of "full costs" under the Copyright Act.  While this may not be the juiciest of copyright issues the Court has grappled with as of late, it is one that calls for clarification given the circuit split on the issue. In a copyright case, there are potentially two "costs" statutes in play.  There is the general "taxable costs" statute embodied in 28 U.S.C. § 1920.  It authorizes the trial court to award costs to the prevailing party related to such things as clerk fees, deposition transcription fees, and similar administrative expenditures incurred during the litigation.  The Copyright Act has its own provision related to costs embodied in 17 U.S.C. § 505.  It provides, in relevant part, that "[i]n any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof” (emphasis supplied).  Some courts have interpreted "full costs" under the Copyright Act to simply mean "taxable costs" under 28 U.S.C. § 1920.  Other courts have held that "full costs" under the Copyright Act means essentially all costs incurred during the litigation by the prevailing party, which brings us to the case that the Supreme Court will review. In Oracle v. Rimini, the trial court imposed a hefty damage award against Rimini for its infringement of Oracle's copyrights.  The trial court also awarded Oracle approximately $12 million in "full costs" under 17 U.S.C. § 505. This included expert witness fees, consultant fees, e-discovery costs and other various expenses, none of which are recoverable under the general "taxable costs" statute.  The 9th Circuit affirmed the trial court's decision.  This sets up a circuit split over the definition of "full costs” as the 8th and 11th Circuits have previously ruled that "full costs" simply means taxable costs and other expenses expressly allowed for under federal law. It is interesting that the Supreme Court took this narrow issue, but it could have large implications for the strength of a copyright plaintiff’s enforcement campaign.  If a plaintiff can recover its “full costs” for litigating, it may increase the pursuit of copyright infringers by also threatening to recover costs, along with experts who specialize in the field and e-discovery vendors.  Of course, § 505 would still be moderated by a court’s discretion (as Oracle argues), but plaintiffs who feel that their case is strong may be more willing to litigate heavily.  This also likely means that willful copyright infringers may have even more to fear than they did before. It will be interesting to hear how the Court considers large requests for expert witness fees, e-discovery, etc., and whether the justices comment on the expense of modern-day copyright infringement litigation.

One of the philosophies of the world-famous Palm restaurant is to treat guests like family. That philosophy may need to be re-examined in light of a recent decision by the New York Supreme Court in Ganzi v. Ganzi, a case involving the families behind the renowned restaurant empire (for those of you not from the Empire State, the Supreme Court in New York is the trial-level court). Following a non-jury trial, Justice Andrea Masley of the Commercial Division found that Walter Ganzi, Jr. (Wally) and Bruce Bozzi, Sr.—grandchildren of the Palm’s founders—breached their fiduciary duties to two family-held corporations in part by issuing below-market license agreements for use of the Palm IP to restaurants and other entities owned by Wally and Bruce. The court awarded damages exceeding $73 million, which could balloon to over $120 million after accounting for interest and attorneys’ fees. The first Palm restaurant was opened in New York City in 1926 by Pio Bozzi and John Ganzi. The Palm IP includes various trademarks and service marks, as well as design and décor elements of the restaurant, including the display of photographs and caricatures. That IP has been put to great use by Wally and Bruce, who have an interest in other Palm restaurants that have opened around the world for the past 45-plus years. Wally and Bruce have built an empire through these “New Palms,” which collectively grossed $1.5 billion from 2006-2017. As revealed through the lawsuit, however, this empire was built in part on improper self-dealing by Wally and Bruce for which Wally’s cousins have now held them to account. The original Palm restaurant was owned by Just One More Restaurant Corp. (JOMR), which also owns the Palm IP. The land on which the original Palm was located was owned by Just One More Holding Corp. (JOMH). Over the years, majority ownership in JOMR and JOMH passed down to Wally and Bruce. Wally’s cousins Gary Ganzi, Claire Breen, and the estate of Charles Cook (another of Wally’s cousins) all hold minority shares in both JOMR and JOMH. After learning that JOMR actually owned the valuable Palm IP, and that it had been licensed for next-to-nothing, they sued Wally and Bruce in 2012 on behalf of themselves and derivatively on behalf of JOMR and JOMH. The trial involved three derivative claims for breach of fiduciary duty and one claim for diversion of corporate opportunity, all arising from three distinct courses of self-dealing by Bruce and Wally. First, JOMR entered into 54 license agreements in 2007 and 2011 with the New Palms through which the Palm IP was licensed for a mere $6,000 per year—the same price at which the Palm IP had been licensed for the first New Palm in Washington D.C. in 1972. Second, for $12,000 a year, JOMR entered into a license agreement with a management company owned by Wally and Bruce, permitting that company to sub-license the Palm IP to third parties, which it did at market rates. Those sub-licenses resulted in the establishment of a Palm restaurant at JFK airport, the creation of Palm-branded household goods for retail stores, and millions in sub-licensing fees for the management company. Third, JOMH leased the real estate where the original Palm was located to JOMR at below market rates. All of these actions were taken without the knowledge of Wally’s cousins, the minority shareholders. In fact, little to no corporate formalities had been observed since the 1970s. As the court put it, Wally and Bruce “treated JOMR as their own without any regard to the other shareholders.” In finding in favor of JOMR on the first claim for breach of fiduciary duty, the court noted that the 54 license agreements constituted a “textbook example of fiduciary misconduct” because those agreements “grossly” favored the New Palms (and thus Wally and Bruce), over JOMR, and deprived JOMR of fair market value for the Palm IP. The fair market value should have been based upon the revenues of the New Palms, and the court credited expert testimony that a royalty rate of five percent was appropriate, entitling JOMR to more than $68 million, plus interest. The court also declared all 54 of the licenses between JOMR and the New Palms as void, and enjoined Wally and Bruce from further harming JOMR through below-market licensing of the Palm IP. The second claim for breach fiduciary duty and the claim for diversion of corporate opportunity both arose out of the license agreement with Wally’s and Bruce’s management company. The court held that the license agreement was a “plainly self-interested transaction,” and noted that “[a] more obvious example of the breach of a fiduciary’s duty of loyalty is difficult to envision.” The court ruled that JOMR was entitled to $3,146,995 for these claims, which it calculated by subtracting the $12,000 per year that JOMR received from the management company from the sub-licensing revenues it earned through its deals pertaining to the JFK airport Palm and the branded household goods. The court also found in favor of JOMH based on Wally and Bruce undervaluing the real estate at which the original Palm was located. JOMH had charged JOMR $63,233 annually in rent for a property that should have commanded $223,000 in annual rent as of late 2006. JOMH was thus entitled to $1,742,000 in damages. Finally, the plaintiffs were awarded their attorneys’ fees under N.Y. B.C.L § 626(e). Counsel to Wally and Bruce has indicated that they intend to appeal the decision. It is notable to remember that, because this was a derivative action, although the damages award is sizeable, the damages are owed not directly to the plaintiff cousins, but instead to JOMR and JOMH, in which Wally and Bruce are still the majority shareholders. Nevertheless, following the award and the voiding of the license agreements, JOMR—and the cousins’ minority positions in JOMR—will increase in value significantly. Putting the family dynamics aside, the most interesting result of this case from an IP perspective is the court’s adoption of a five percent royalty rate as fair market value for IP licenses in the context of the hospitality industry. Licensors and licenses of similar business both should be aware of this precedent when determining fair market value for such IP.

As the U.S. cannabis market continues to grow at an extraordinary pace, a number of celebrities and companies have extended their names or brands to cannabis products via partnerships with licensed growers and dispensaries.  On the celebrity side, these partnerships include Willie’s Reserve (Willie Nelson), Bob Marley (Marley Natural), Whoopi Goldberg (Whoopi & Maya) and Snoop Dogg (Leafs by Snoop). But recent modifications to draft regulations in California threaten to restrict the ability of celebrities or companies to lend their names or brands to cannabis products sold in those states where adult or medicinal cannabis use is legal via intellectual property licensing arrangements to licensed sellers.  The proposed new rules, from the three state licensing authorities that regulate medicinal and recreational cannabis in California—the Bureau of Cannabis Control (“BCC”), the California Department of Public Health (“CDPH”) and the California Department of Food and Agriculture (“CDFA”)—came out in October as an update to the draft regulations that had been previously published in July. Among the updates contained in these proposed new rules is one that stands out for its potentially restrictive impact on brand and other types of IP licensing in the cannabis space.  While the regulations already require all commercial cannabis activity (other than authorized retail activity) to be conducted between licensed operators, the BCC’s updates to the draft regulations go further to provide that cannabis license holders cannot conduct commercial cannabis activities on behalf of, at the request of, or pursuant to a contract with any person that is not licensed under the Act.  The listed prohibited commercial cannabis activities are now defined to include the manufacturing or packaging of cannabis goods according to the specifications of a non-licensee, as well as packaging and labeling cannabis goods under a non-licensee’s brand. These updates are most likely intended to seek to curb the ability of unlicensed cannabis businesses to conduct regular business through licensed businesses by selling white-labeled products to such licensed businesses or otherwise.  However, the proposed changes could potentially have far-reaching implications for any authorized cannabis operators and IP licensors engaging with these companies who have an existing license deal or are considering entering into an operating relationship.  With the requirements for obtaining a cannabis license so arduous, a licensing deal seemed to be an easy option for non-licensees to get their brand into the cannabis industry.  But with the new restrictions, non-licensees may not have a direct licensing option to get their brand onto cannabis goods.  While authorized cannabis operators and non-licensees may be able to turn to more complex contractual structures in order to continue to do business together, parties will need to tread carefully. The deadline for public comment on the BCC’s changes was on November 5th. It remains to be seen whether the BCC’s proposed changes will ultimately be incorporated into the proposed rules and, eventually, continue through the formal rule making process until they are adopted as non-emergency regulations.

On August 31, 2018, the Standing Committee of the National People’s Congress of the People’s Republic of China promulgated the E-Commerce Law of the People‘s Republic of China (“Law”) which will come into effect on January 1, 2019. As Chinese e-commerce platforms such as Alibaba, Taobao, JD.com, and others are now among the world’s largest e-commerce platforms handling billions of dollars of transactions each year, this Law has been widely called for by different stakeholders to regulate the rapidly growing e-commerce market in China.  The Law is formulated with an intent to protect the legitimate rights and interests of various entities in the e-commerce ecosystem, regulate the market order, and promote the continuous and healthy development of e-commerce.  Some key provisions relating to intellectual property protection are as follows: The Law codifies that an e-commerce platform operator who is aware or should be aware that a business operator using the platform has infringed the intellectual property rights of others should take necessary measures such as deleting, shielding or disabling access to the hyperlink to the infringing activities, terminating transaction or services (the “Necessary Measures”), failing which the platform operator will be held jointly and severally liable with the infringer. Currently, Article 36 of the PRC Tort Law only provides that an internet service provider should take necessary measures if they are aware of the infringing activities.  The question of whether the internet service provider is obliged to take action if it “should be” aware of such infringing activities has mostly been left unanswered by the PRC Tort Law. The Law provides a standardized take-down procedure pursuant to which the intellectual property right owner should notify the platform operator of the infringing activities and provide prima facie evidence of infringement. The platform operator should then take the Necessary Measures and promptly forward such notice and evidence to the business operator. The business operator may submit a counter-notice of non-infringement, which should include prima facie evidence in support of the counter-notice, to the platform operator.  Upon receipt of such counter-notice and evidence, the platform operator should promptly forward them to the intellectual property rights owner, who may lodge a complaint with the competent authorities or file a lawsuit with a People’s Court within 15 days from the receipt of such counter-notice and evidence.  If no such complaint or lawsuit is filed, the platform operator should terminate the Necessary Measures and allow the business operator to resume selling on its platform.  Platform operators who fail to adopt this requisite take-down procedure against a business operator who has committed intellectual property infringement could face a fine ranging from RMB 50,000 to RMB 2 million (approximately US$7,300 to US$290,000). To avoid misuse of the take-down procedure, the Law provides that the complainant will be civilly liable for any notice it filed against a business operator who suffers damages from the loss of business during the take-down period. The Law goes even further to provide punitive damages, and the complainant will be liable to pay double compensation if the notice is filed maliciously. Under the Law, a platform operator has a duty to remind business operators to obtain business licenses from administrative authorities and to require the business operators to display their business license information online. Such requirement will help intellectual property rights owners in uncovering the identity of the infringers. While a take-down procedure is now codified in the Law, there are still a number of issues that need to be clarified.  For instance, it is unclear whether e-commerce platform operators would include social media platforms.  It is also unclear whether intellectual property rights owners would need to submit prima facie evidence of infringement every time they file a take-down notice.  Currently, some platform operators provide a streamlined enforcement mechanism for some well-known brand owners, and automatically process take-down notices from them without requiring submission of any evidence.  The Law could arguably increase the costs for well-known brand owners to protect their intellectual property rights if they are required to submit evidence every time a take-down notice is filed. Implementing regulations to the Law are expected to be published before the Law comes into effect.  Hopefully, the implementing regulations will shed some light on these issues.  Overall, stakeholders should welcome the promulgation of the Law, which should better streamline e-commerce activities in China.

The long awaited date for implementation of Canada’s amended Trademarks Act has been announced.  The amendments will come into force on June 17, 2019, creating significant changes for trademark practice in Canada. The amendments to the Trademarks Act, announced in 2014, were made to allow Canada to join five international IP treaties, including the Madrid Protocol, Singapore Treaty, and Nice Agreement.  Some of the major changes include the following: Applicants will be required to use the Nice Classification administered by the World Intellectual Property Organization (previously there was no class system or identification of class necessary in Canada).  As a result, applicants will now be required to pay registration fees per class identified, as opposed to a single application fee of $250 CAD that is presently used.  Given this significant increase, it may be worthwhile to consider filing multi-class applications now, to avoid the increase in filing fees. Applicants will no longer be required to identify a date of first use at the time of filing and Declarations of Use will no longer be required for registration (both for new applications and pending applications).  Notably, practitioners in Canada anticipate this will lead to an increase in the number of trolls and squatters applying to register trademarks in Canada.  There have already been reports of a sharp increase in 2017 in the number of applications filed in Canada covering all 45 classes of the NICE Classification, something that was relatively rare in Canada before 2017. It will be possible to divide an application in Canada which will allow applicants to manage the speed at which applications are registered when there may be challenges to only some of the identification of goods or services in an application. The government registration fee will be eliminated from the application process, though application filing fees and renewal fees will be increased.  The application filing fee will be $330 CAD for the first class plus $100 CAD for each additional class (v. current $250 CAD filing fee).  The registration renewal fees will be $400 CAD for the first class plus $125 CAD for each additional class (v. current fee of $350 CAD). The term of registration in Canada will be reduced from 15 years to 10 years (the 15-year term for existing registrations will not change). Canada will officially accede to the Madrid Protocol, meaning Canada may be designated in an International Registration filed with WIPO. Given the significant changes that will impact trademark registration and enforcement procedure in Canada, now is the time to consider Canadian registration strategy for important brands.  Expansion of existing registered protection to guard against the likely onslaught of trolls and squatters should be prioritized, as well as consideration of filing of multi-class applications now, before fee changes take effect. We will post further updates as implementation of the amended law progresses.  Stay tuned to The TMCA.

Earlier this month, the Fifth Circuit ruled that under the Defend Trade Secrets Act (18 U.S.C. § 1836, et seq.) (“DTSA”), a defendant is not the “prevailing party” by virtue of a plaintiff voluntarily dismissing a DTSA claim, where the dismissal is without prejudice.  The DTSA provides for fee shifting in favor of a “prevailing party” defendant in the event that “a claim of the misappropriation is made in bad faith, which may be established by circumstantial evidence.”  As a matter of first impression, in Dunster Live, LLC v. Lonestar Logis Mgmt. Co., LLC, et al. the Fifth Circuit determined that the defendants were not the prevailing party under the DTSA when a plaintiff voluntarily dismissed its DTSA claim shortly after the trial court denied plaintiff’s request for a preliminary injunction.  In affirming the lower court’s ruling that the defendants were not the prevailing party, the Court reasoned that federal authority in the context of other similar federal fee-shifting statutes establish that “[a] dismissal without prejudice means no one has prevailed; the litigation is just postponed with the possibility of the winner being decided at a later time in a new arena.” In Dunster, the plaintiff and defendants were formerly members of the same LLC that held a contract with the state of Texas to construct and build the blue signs seen on Texas highways advertising food, lodging, and gas stations located at approaching exits.  In the months leading up to the expiration of the contract, the defendants formed a new company without the plaintiff, and won the follow-on contract.  The plaintiff sued the defendants in federal court in Texas claiming that the defendants stole proprietary software and a database in violation of the DTSA, and also alleged related state law claims.  The plaintiff sought a preliminary injunction to stop the new company from taking over the contract, which was denied. Following the denial, the plaintiff sought permission to dismiss the case without prejudice, explaining that it no longer wished to pursue the federal trade secret claim, which was the only basis for subject matter jurisdiction.  The defendants opposed the motion on the ground that the plaintiff was engaging in “bad faith” by seeking to avoid an adverse ruling and liability for substantial attorneys’ fees.  The trial court rejected the defendants’ argument and allowed the dismissal without prejudice, not reaching the question of whether the misappropriation theory was raised in bad faith.  After the dismissal, the defendants sought an award of in excess of $600,000 in attorneys’ fees that they had incurred in the litigation.  The trial court denied the fee request, reasoning that a dismissal without prejudice did not make the defendants the prevailing party because the plaintiff is “free to resurrect its claims against the defendant[s] and may prevail at a later date.”  In fact, the plaintiff filed essentially the same lawsuit in state court, excepting the DTSA claim, just six days after the federal court dismissal. The defendants appealed the denial of their fee request, but did not appeal the trial court’s ruling that the dismissal could be entered without prejudice. The Fifth Circuit affirmed the trial court’s ruling on the fee request, finding that for a party to be eligible to obtain fees under the DTSA, they must (a) prevail; and (b) must do so under the listed scenarios provided under the statute that also require a showing of bad faith or malice.  Relying on federal authority interpreting other federal fee-shifting statutes, the Court held that a party does not prevail when the plaintiff dismisses its DTSA claim without prejudice.  In so ruling, the Court rejected defendants’ argument that this rule allows plaintiffs to evade paying the defendant’s fees by strategically seeking a dismissal without prejudice once a plaintiff realizes the suit is doomed.  The Court reasoned that this argument ignores the fact that, under FRCP 41(a), a dismissal without prejudice requires court approval unless the dismissal occurs very early in the game (i.e. prior to the defendant filing either an answer or a motion for summary judgment), and one of the reasons a court may deny such a request is bad faith on plaintiff’s part; if a court finds bad faith, it can require a dismissal with prejudice.  In such instances, the defendant may very well be the prevailing party.  The Court noted that Rule 11 also provides a check against bad faith litigation conduct, as sanctions can be levied against a party litigating in bad faith even where there is no prevailing party. The Court likewise rejected the defendants’ argument that they prevailed when the Court rejected plaintiff’s attempt to obtain a preliminary injunction.  Borrowing from a sport’s analogy, the Court quipped that “prevailing party status ordinarily requires being ahead when the final whistle blows in a case, not at halftime…. Taking the lead early in the lawsuit thus did not make the [d]efendants eligible for fees….  The dispute has now been rescheduled for state court, where the winner will be decided.  Because there was never a final score in this federal lawsuit, the [DTSA] does not allow attorney’s fees.” In light of the Court’s bright line ruling, defendants seeking recovery of their fees after a halftime voluntary dismissal of a plaintiff’s meritless or frivolous DTSA claim would be well-advised to put their eggs into the basket of arguing that the claim should be dismissed with prejudice, under a bad faith theory or otherwise.

For our U.S. readers with Thanksgiving and food still on their minds, the TMCA thought it would be timely to comment on recent news from Europe about cheese. The Court of Justice of the European Union (“ECJ”) held that there was no copyright in the taste of cheese, and the first question that popped into mind was “did the journalists get it wrong again?” It turns out that they did not. Well, the result (denying copyright protection for the taste of a food product) is hardly surprising. The more interesting question for readers of this blog is why the issue was brought before the highest court in the EU? In Common Law jurisdictions, such as the U.S., Canada, the United Kingdom and Australia, copyright legislation typically lays down an exhaustive list of the types of work or subject-matter that can attract copyright protection, such as the list in USC Title 17 §102. The list invariably covers the main categories of literary, dramatic, musical and artistic works and performances, as well as some special types of subject-matter such as films and sound recordings. Usually, the law will recognise copyright only in a published work and subject to requirements such as fixation and originality. There are some variations between jurisdictions. EU law, for example, recognises a special copyright in databases. However, many European jurisdictions adopt a slightly different approach in their copyright legislation, reflecting the text of the Berne Convention for the Protection of Literary and Artistic Works. Article 2(1) of the Convention states that “The expression ‘literary and artistic works’ shall include every production in the literary, scientific and artistic domain, whatever may be the mode or form of its expression”. The Dutch copyright law sets out a list of works that can attract copyright protection, not particularly different from similar provisions in many other countries. However, in addition to specific forms of subject-matter, the Dutch law lists as “literary, scientific or artistic work”, “in general, every production in the literary, scientific or artistic domain, whatever may be the mode or form of its expression”. This catch-all provision opens the door to allegations of copyright infringement in relation to many forms of copying. In a previous case, a Dutch court reportedly accepted in principle that there could be copyright in the scent of a perfume. In the case at hand, the food retailer, Levola Hengelo BV accused its rival, Smilde Foods BV, of copying the flavour of one of its products, Heksenkaas, a spreadable dip containing cream cheese and fresh herbs. Levola argued that “copyright in a taste refers to the ‘overall impression on the sense of taste caused by the consumption of a food product, including the sensation in the mouth perceived through the sense of touch”. The case was referred by the Dutch court to the ECJ on a point of interpretation of EU harmonising legislation in the field of copyright which requires Member States (amongst other things) to ensure protection for authors of their works. The ECJ interprets this provision as one that requires uniform application of the concept of “works” throughout the EU. Accordingly, national copyright law can only extend to the taste of a food product if EU law recognises the taste as a work of authorship. The ECJ wisely avoided the potentially murky question of classification, whether the taste of a food product (which is clearly the result of considerable skill and labour) should be treated as a form of literary, scientific or artistic work. Instead, the Court focused on the principle (drawn, again, from the Berne Convention) that copyright protects expressions, not ideas. That principle, the Court held, requires that the subject-matter of protection has to be expressed in a manner which makes it identifiable with sufficient precision and objectivity. The ECJ concluded that the taste of a food product does not meet this requirement. It is too subjective and variable. “Taste sensations and experiences” the Court held, “are subjective and variable since they depend, inter alia, on factors particular to the person tasting the product concerned, such as age, food preferences and consumption habits, as well as on the environment or context in which the product is consumed”. Further, the Court pointed out, there is no technical or scientific way in which taste can be objectively identified with sufficient precision. So there is no copyright in the taste of a food product, not because food (or its taste) is not a work of art, a scientific or artistic work – it may well be – but simple because it is too subjective.

The TMCA is  back from the 2018 ANA/BAA Marketing Law Conference, Upping Your Game: Pragmatic Business and Compliance Strategies.  While in Chicago, we had the privilege of obtaining a comprehensive review of this year in marketing law and gained some insight into the areas of focus for enforcement of marketing laws.  We also were witness to the season’s first snowflakes.  While we cannot recreate the snowflakes here, we give you a run-down of some of the key take-aways from the conference. Privacy: The buzz word for the entire conference and top of mind for all attendees.  Privacy topics included the EU General Data Protection Regulation (GDPR), California Consumer Privacy Act (CCPA), Illinois Biometric Information Privacy Act, anticipated developments at the state law level, and the potential for federal law preempting state regulation.  Recommendations to implement “privacy by design” abound.  Given the inconsistencies between statutes and the compliance headaches that come from a “checkbox” approach to compliance, in-house counsel from countless organizations touted a change in thinking about privacy.  They recommended viewing privacy as a competitive advantage and building privacy into the planning process to enable a proactive approach.  To do this, a few suggestions by panelists included: An Integrated Legal Department: Legal’s involvement should occur early on. Rather than thinking of Legal as a stopping point for final sign off, Legal should be involved from the beginning.  This facilitates the integration of privacy considerations and processes into the new program, campaign, or product, and helps ensure that any data gathered up-front is usable. Data Mapping: When developing and implementing a privacy program, determine where data is kept, what data is being collected, what is being done with that data, and why the data is valuable. Also consider whether the data is necessary or just nice to have. Compliance “Tweaks”: Determine what needs to be done differently with respect to compliance. The general consensus by in-house counsel at the conference was that applying the strictest standard across the board is not necessarily the best approach for business.  Recommendations included setting a floor and treating outliers separately, as needed. Knowledge Management: Identify and define a group of individuals within the company who have an understanding of the data collected, stored, and used, and who can be consulted about these topics when determining compliance needs or implementation. Well-Documented Consent: Design appropriate privacy and notice/consent into the process and maintain documentation of that consent. Not having documentation of consent is as good as not having consent. Technological Hurdles: Cautionary tales were exchanged over the fact that compliance solutions can involve technical aspects that are potentially difficult to implement and/or involve many moving parts both internally and externally. Such factors should be accounted for when determining and implementing compliance mechanisms. “Truth” in Advertising: In an era of “fake news” and alternative facts, the question posed is: What content can be trusted?  Influencers and consumer reviews are playing an ever-increasing role in consumer decision-making—a bi-product of the social media age.  The presence of undisclosed sponsored posts and paid reviews, as well as bots and fake accounts, undermines truth in advertising and erodes consumer trust.  Consequently, consumer reviews, insider rating, and substantiation are big targets for the NAD, FTC, and state AGs.  Other targeted areas of enforcement include affiliate marketing and lead generation. The OmniChannel: Retailers gathered to discuss expansion of the customer experience and the switch from a retail-centric focus to a consumer-centric one.  The OmniChannel is about creating a seamless shopping experience.  This approach focuses on building customer loyalty and providing the same service and experience regardless of channel.  Panelists generally agreed that this seamless experience for the consumer is much more difficult to implement from the legal perspective, and their companies have made a conscious effort to integrate legal into the business side.  Panelists shared approaches taken by their various legal departments; suggestions included using legal questionnaires to gather information from the business side, building relationships with partners and affiliates based upon solid grounds, using data mapping as a key tool, and implementing privacy by design. The Shared Economy: The community-based business model brings with it issues of trust and social values.  Pioneers in this area discussed what it means for consumers to be users and providers, and how the corporate entity can successfully enable peer-to-peer interactions.  The integration of policy and marketing was a focus.  Topics included: implementation of community guidelines that empower hosts and providers rather than taking the role of management; thoughtfully regulating third-party content to prevent hate speech, privacy violations, and IP violations; using “relevance” and the Communications Decency Act § 230 as a tool; and understanding the role of consumer reviews in building and sustaining trust in the platform. Telephone Consumer Protection Act (TCPA): For those of you who follow our Consumer Financial Services Blog, you already know that the TCPA is having a banner year.  Developments spanned from the ACA International ruling issued by the D.C. Circuit in March, to legislative activity on Capitol Hill (discussed here and here), the FCC’s numerous requests for comment and an Omnibus II on the horizon, and now the Supreme Court’s grant of certiorari in Pdr Network v. Carlton & Harris Chiropractic, No. 17-1705, 2018 U.S. LEXIS 6754, at *1 (Nov. 13, 2018) (considering whether the Hobbs Act requires a district court to accept the FCC's legal interpretation of the TCPA).  This area of relative uncertainty and constant change was a recurrent reference across presentations and a complete topic for a breakout session.  Everything from the shifting definition of ATDS to recycled cell phone numbers and abusive plaintiffs and plaintiffs’ counsel was fair game. Cannabis Marketing: Our own Sarah Robertson participated in a panel on cannabis marketing in the U.S. and Canada.  The panel covered the regulatory framework for and, in some cases, the significant constraints placed on, the sale and advertising of cannabis in the U.S. and Canada, from the lawyers’ perspectives, and also from those of a cannabis producer and agencies operating in the packaging design and digital marketing worlds. Overall, the schedule was packed, the topics were robust, and the participation was plentiful.  We look forward to next year’s ANA/BAA Marketing Law Conference in sunny San Diego (November 4-6, 2019), and hope you can join us there.

Obtaining trademark registration for color trademarks can be a complicated undertaking. In a recent precedential opinion, the Trademark Trial and Appeal Board in In re Forney Industries, Inc. weighed in on the registrability of a color mark when used on product packaging, holding that: (1) color marks can never be inherently distinctive when used either on a product or product packaging; and (2) a mark consisting of multiple colors without any additional design elements is treated the same as a single color mark and cannot be inherently distinctive. Forney involved an application to register this mark consisting of three colors, for use on products in multiple classes including metal hardware, welding products, industrial marking products and plastic tape used in auto safety: Applicant’s description of the mark stated: “The mark consists of the colors red into yellow with a black banner located near the top as applied to packaging for the goods. The dotted lines merely depict placement of the mark on the packing backer card.” As the Board noted, “Applicant has not attempted to combine its color mark with a uniform shape, pattern or other distinctive design. Instead, the specimens filed in the application show the colors applied to product packaging of varying shapes....The specimens also confirm — consistent with product packaging generally -- that Applicant’s proposed mark serves as a background carrier for other elements on the packaging.” Two examples of the specimens are shown here:                   After a refusal of registration on the ground that the mark was not inherently distinctive, Applicant argued in an ex parte appeal that the mark should be treated as product packaging with multiple colors that may be considered inherently distinctive and registrable without proof of acquired distinctiveness. The Board disagreed, holding that the Examiner correctly determined that Applicant was attempting to register a color mark as applied to product packaging (the packaging backing cards), not a product packaging mark. Having determined that Forney’s applied-for mark was a color mark, the Board then held that when evaluating marks that consist of color, the same rules apply whether the color is applied to the products themselves (like the pink color of fiberglass insulation in In re Owens-Corning Fiberglas Corp., 774 F.2d 1116 (Fed. Cir. 1985), or the green-gold color of dry cleaning pads in Qualitex Co. v. Jacobson Products Co., 514 U.S. 159 (1995), or to product packaging. In both situations, the color mark cannot be considered inherently distinctive and an applicant must present proof of acquired distinctiveness. According to the Board, this standard of equivalent treatment for color marks whether used on the products themselves or on product packaging is dictated by the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Samara Bros. Inc., 529 U.S. 205 (2000), which held that “a particular color on a product or its packaging” can never be inherently distinctive and may only be registered on a showing of acquired distinctiveness. The Board’s decision in Forney also clarified that the same requirement of proving acquired distinctiveness of color marks applies equally to both single color marks and to multi-color marks that do not include any additional elements, such as shapes and designs. In order to be considered inherently distinctive, a single color or multiple colors must be combined with a well-defined shape, pattern or other distinctive design. Here, Forney’s mark applied consisted of three colors without any “distinctive well-defined shape, pattern or other distinctive design....” Accordingly, the mark could not be considered inherently distinctive. Forney has already filed a Notice of Appeal to the Court of Appeals for the Federal Circuit, so there be may be one more round on the complex issues involved in this decision — The TMCA will continue to monitor the case and report on any further colorful developments!

Earlier this year, we wrote about the First Circuit’s decision in In re Tempnology, LLC, a bankruptcy case in which the First Circuit cemented a circuit split over whether a trademark licensee could retain its trademark rights after a debtor rejected the trademark license under the Bankruptcy Code. That was our third post about the case—we first wrote about it in December 2015 and then again in March 2017—and we predicted that the issue was headed for the Supreme Court. It has now arrived at the Supreme Court, which granted cert. in October to hear the case, and is poised to put an end to this decades-old, circuit-dividing issue. Trademark owners, licensees, intellectual property lawyers, bankruptcy lawyers, and, of course, all of us here at The TMCA, are watching with bated breath. As we explained in our previous posts, under section 365(a) of the Bankruptcy Code, a debtor has the right to reject executory contracts, meaning that the parties to any rejected contract are relieved of their obligations to perform.  However, Congress included an exception for “intellectual property” licenses in section 365(n), which allows licensees to continue using the licensed intellectual property through the end of the term of the license even if the debtor rejected that license under section 365(a). Under the Bankruptcy Code, “intellectual property” is a defined term, which includes both copyrights and patents, but does not include trademarks. In drafting section 365, Congress had concerns about whether trademarks should be treated differently from other types of intellectual property because the enforcement of a trademark license requires a debtor to enforce and control the quality of its marks. Due to these concerns, Congress left it to the courts to figure out what to do with trademark licenses. Although some courts treated them like other intellectual property, a number of courts, like the First Circuit in In re Tempnology, relied on the absence of trademarks from the definition of intellectual property to conclude that Congress intended to exclude trademarks from the protection granted to other forms of intellectual property. As a result, the fate of a rejected trademark license has been subject to the jurisdiction in which the debtor trademark owner files for bankruptcy. That has not been a good outcome. Because Congress has failed to fix the problem by including trademarks in the definition of “intellectual property” or by formally excluding them, the issue is now before the Supreme Court.  While we cannot predict the outcome of the case, we can promise you this: as soon as the Supreme Court issues its decision, we will write about it and tell whether the Court got it right and how the Court’s ruling affects trademark licenses in bankruptcy going forward. Stay tuned!

The EU General Data Protection Regulation (GDPR), billed as the most important development in data privacy regulation in at least 20 years, arrived with a bang in May of this year and companies have been scrambling to implement compliance measures that will avoid its stiff penalties. Some uncertainty relates to how and to what extent the GDPR will be enforced outside the EU.  The GDPR expressly applies to any organization outside the EU that processes personal data of individuals in the EU in connection with offering goods or services to such individuals or monitoring their behavior, and the GDPR requires such organizations to designate a representative within the EU (seemingly intended to facilitate enforcement).  As a practical matter, it is unknown how its requirements will actually be enforced against entities outside the EU and there is as of yet no regulatory guidance on this issue. A recent development out of the UK highlights the extraterritorial enforcement issue.  In July, the Information Commissioner’s Office (ICO), which is the UK’s data protection regulator, issued its first ever GDPR “enforcement notice” against an entity located outside the UK.  That entity is AggregateIQ Data Services Ltd (“AIQ”), a Canadian company. The ICO investigated AIQ’s involvement with Cambridge Analytica’s alleged use of EU citizens’ Facebook data for analytics for the Brexit political campaign.  AIQ disputed allegations that it is affiliated with Cambridge Analytica and refused to fully cooperate with the ICO’s investigation, taking the position that it is not subject to the ICO’s jurisdiction.  Nonetheless, based on the evidence it was able to collect, the ICO found that AIQ violated the GDPR by, among other things, processing personal data of EU citizens in a way that the individuals were not aware of, for purposes which they would not have expected, and without a lawful basis. The ICO’s GDRP enforcement notice ordered that AIQ stop processing “any personal data of UK or EU citizens obtained from UK political organisations or otherwise for the purposes of data analytics, political campaigning or any other advertising purposes” within 30 days of the notice date.  Failure to comply with such a notice could result in the ICO issuing a fine of up to 20 million euros or 4% of the company’s annual worldwide revenue, whichever is greater. AIQ appealed the enforcement notice to the first-level tribunal arguing that the ICO did not have jurisdiction over the company, the GDPR did not apply because the alleged conduct had taken place before the GDPR was in force, and the notice was too broad.  The ICO thereafter issued an amended enforcement notice that, according to the ICO, clarifies the steps AIQ must take in order to comply with the notice.  The ICO’s amended notice orders AIQ to delete any UK personal data on AIQ's servers that the company had told the ICO it held in May 2018. AIQ has since withdrawn its appeal and indicated it will comply with the amended enforcement notice. It is important to note that Canada’s Office of the Privacy Commissioner and British Columbia’s Information and Privacy Commission (“BCIP”) had been working in close cooperation with the ICO in the investigation of AIQ since late 2017.  Canada has its own privacy laws applicable to AIQ’s alleged conduct – Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA), which will come into effect on November 1, 2018, and the Personal Information Protection Act (PIPA) applicable in certain provinces. This suggests that Canadian authorities might be willing to assist with GDPR enforcement against Canadian companies, at least in high-profile cases that impact Canadians (even if indirect).  The Canadian government’s willingness to do so likely relates to the fact that Canada has its own privacy laws similar to GDPR that it must enforce and to the close historical ties between Canada and the UK.  This case also suggests that a non-EU company would likely comply with a GDPR enforcement notice in cases where that company’s government assists the EU’s investigation. However, there are still many outstanding questions regarding extraterritorial enforcement of the GDPR.  This case provides little insight regarding the extent to which other non-EU countries would assist with executing a GDPR investigation or enforcement notice against one of their own companies, and does not forecast what a non-EU company served with a GDPR enforcement notice would do in situations where local authorities do not get involved. Presumably, non-EU companies with significant assets in the EU that the EU government is able to seize, or having business interests in the EU that they wish to pursue, would feel compelled to satisfy GDPR enforcement notices in order to avoid the stiff GDPR penalties or repercussions in terms of their freedom to conduct business.  But what about other companies located in countries that, unlike Canada, would not get involved in a GDPR investigation or enforcement?  So far, the international community has not developed a system for cross-border enforcement of privacy rights.  It is unlikely that such a system will be put in place at least until a reasonable level of harmonization is achieved in the approach to data protection adopted across different jurisdictions.  As long as countries continue to take very different approaches to data protection and privacy, it is likely that the existing international arrangements for the mutual recognition and enforcement of judgements will not be very effective in relation to enforcement orders and penalties imposed by national authorities for the infringement of such rights. For the same reasons, it remains unclear how GDPR enforcement would play out in the United States.  The U.S. currently has no federal law similar to the GDPR.  The Trump administration is discussing a U.S. version of the GDPR that would have provisions similar to provisions in the GDPR, but the passage of such a law is not imminent.  To the extent the U.S. enacts such a law, the U.S. might be incentivized to assist with GDPR investigations or enforcement against U.S. entities at least to the extent consistent with the terms of the U.S. law for purposes of encouraging reciprocal comity with the EU.   However, given the Trump administration’s foreign policy stance, it is highly unlikely that the U.S. would assist in enforcing violations of any GDPR provisions that go beyond the U.S. law. In June, California enacted the California Consumer Privacy Act of 2018 (“CCPA”), which is similar in some respects to the GDPR.  It remains to be seen whether the California Attorney General’s office would assist with a GDPR investigation of a California company to encourage reciprocal comity with the EU in connection with enforcement of their respective data privacy laws.

In the latest chapter of a long-running trademark dispute involving the outsole used by Converse, Inc. with its well-known CHUCK TAYLOR shoes, the U.S. Court of Appeals for the Federal Circuit has issued a ruling vacating an International Trade Commission decision that went against Converse and booting the dispute back to the ITC on remand. In 2014, Converse initiated a proceeding against thirty two respondents in the ITC, seeking a general exclusion order that would prevent the importation and sale of shoes using an outsole confusingly similar to the outsole design Converse succeeded in registering with the Patent and Trademark Office in 2013 shown below, consisting of: (i) two stripes on the midsole of the shoe; (ii) the design of the toe cap; and (iii) the toe bumper, featuring diamonds and line patterns, as well as the relative position of these elements to each other. Most of the respondents either settled or defaulted, but three defended against Converse's claims and obtained a decision from the ITC in 2016 ruling in their favor. In its decision, the ITC held that Converse's outsole design lacked secondary meaning and was therefore not an enforceable trademark, but that, if Converse did own trademark rights in its design, they had been infringed by the respondents. But on appeal to the Federal Circuit, all parties have found the shoe on the other foot, because the Court vacated both aspects of the ITC ruling. The starting point for the Court's decision was an issue that neither Converse nor the ITC addressed, namely the relevant point at which the secondary meaning of Converse's design, and therefore its validity, should be assessed. The Federal Circuit held that the date at which the secondary meaning of Converse’s design must be determined is the date when each respondent began its allegedly infringing activity, and that the ITC should consider this issue on remand. And, since all of the remaining respondents began selling shoes about which Converse complained before Converse’s 2013 registration issued, Converse could not benefit from the presumption of validity afforded to the owner of a federal trademark registration. Next, the Federal Circuit found that the ITC stepped over the line by giving undue weight to respondents’ survey and their evidence of third-party use in assessing secondary meaning. The court clarified for the first time the factors that should be considered to determine whether secondary meaning has been established: (1) association of the trade dress with a particular source by actual purchasers (typically measured by customer surveys); (2) length, degree and exclusivity of use; (3) amount and manner of advertising; (4) amount of sales and number of customers; (5) intentional copying; and (6) unsolicited media coverage of the product embodying the mark. On the first factor, the court cast significant doubt on the relevance of the respondents’ survey, since it was conducted in 2015, long after the alleged infringement began. With respect to the second factor, the court determined that the ITC had committed a foot fault by considering evidence of third-party shoes that did not fit the facts of the case, largely because they were too distant in time from the alleged infringement. Indeed, the court ruled that, on remand, the ITC should consider primarily evidence of third-party uses that began or were ongoing within the five years preceding the alleged infringement. In addition, relying in part on the well-known Second Circuit case, Scarves by Vera, Inc. v. Todo Imports, Inc., 544 F.2d 1167, 1174 (2d Cir. 1976), the ITC was instructed to focus on old shoes available within the relevant five-year period that used designs “substantially similar” to that of Converse in assessing this secondary meaning factor. Finally, the Federal Circuit cautioned the ITC that, in assessing likely confusion, only shoe designs that were “substantially similar” to that of Converse could qualify as infringing, a newly articulated, heightened standard that the court has now directed must be applied in trade dress cases. This latter holding and certain other aspects of the Federal Circuit’s decision prompted a vocal dissent from Judge Kathleen O’Malley, who found that the majority was walking down a troublesome path with respect to certain aspects of its ruling. Specifically, Judge O’Malley found it unnecessary for the court to weigh in on the validity of Converse’s registration, as opposed to its enforceability against the remaining respondents; the quality of respondents’ survey evidence; and on the issue of likely confusion. At the same time, Judge O’Malley did agree with the majority’s articulation of the legal standard governing the inquiry into secondary meaning. It is not clear when the other shoe will drop in the next phase of this dispute, but it would seem likely that the losing party will run back to the Federal Circuit, after the additional proceedings on remand are completed.

In the not too distant past, consumer product brands hired celebrity figures to act as their official ambassadors. These celebrities appeared in traditional media such as TV commercials and celebrity interviews in print publications, as well as online. Jamie Lee Curtis spooning up Dannon Activia yogurt comes to mind. But with the exponential growth of social media over the past ten years, brand power and influence has shifted away from celebrities to influencers such as bloggers, YouTubers and other everyday people who have developed niche expertise and authority. This "peer-to-peer marketing" is seen as being more authentic and relatable, which, based on the current consumer demand for authenticity, now better drives consumers to buy things. As we have covered extensively here, here and here, enforcement efforts of the Federal Trade Commission have been focused on appropriate disclosures for these social media influencers since their material connections to a consumer brand and the honesty of their brand experiences are not easy for consumers to discern. So what is next on the brand influencer horizon in light of the rise of automated technology such as avatars and chat bots? Computer generated image (CGI) influencers. These CGI influencers in fact already exist. Take Miquela Sousa, also known as Lil Miquela, a 19 year old Brazilian American avatar, who has amassed 1.4 million followers on Instagram as at the time of this post. Lil Miquela is an Instagram model and singer, and is dressed by fashion brands such as Fendi, Chanel and Versace and has also appeared in magazine spreads and music videos. Until Lil Miquela's account was attacked by another avatar, Bermuda @Bermudaisbae in April 2018, when Lil Miquela disclosed that she was a CGI, few people were aware that she wasn't a real human. Both Lil Miquela and Bermuda are said to be products of a California robotics and AI firm named Brud. Other examples of CGI influencers are Shudu, who is the "world's first digital supermodel" and whose posts featuring make-up products such as Rihanna's Fenty Beauty have garnered tens of thousands of likes. Shudu was created by the London based photographer, Cameron James Wilson. CGI influencers such as Lil Miquela are attracting attention and expected to increase in number. Their primary appeal is their ability to let brands avoid some of the challenges that human influencers can bring, such as the high payments they command and the sometimes unpredictability of human influencers' behavior, which can result in FTC violations, reputational harm and more. CGI influencers also allow brands to control the look and personality of their brand ambassadors, with the goal, in some cases, of appealing to a broader range of audiences. An open question is how the FTC disclosure requirements will apply in the CGI context, and whether CGI influencers should follow the same rules as human influencers. A threshold question that equally applies to other automated technologies, such as customer service chat bots, is whether a CGI influencer must disclose that they are not human. If a reasonable consumer would not be aware that the influencer is a digital creation, then such a disclosure may be necessary. A second is whether an avatar would have to disclose that there is a material connection between it and the consumer products that it is featuring and/or that the avatar’s posts are ads. Although the FTC hasn’t issued formal guidance on CGI influencers, FTC guidance on the related worlds of augmented and virtual reality point to this being required. The FTC has also been fairly consistent and persistent in requiring disclosure of relevant material connections, no matter how the connection has come about. And an FTC spokesperson has commented publicly that advertisers using CGI influencers should clearly identify their posts as ads. Yet another issue is whether the product experiences of the avatar can ever be true so as to meet the FTC's testimonial requirements that endorsements reflect the honest opinions, findings, beliefs, or experience of the endorser. Some believe that it is the opinion of the creator of the CGI influencer that is actually being professed. Others argue that the FTC’s Guides do not apply to CGI influencers at all, since these Guides only apply to an “individual, group, or institution.” The former is the more likely standard that the FTC would adopt. All of this remains to be seen if or when the FTC issues further guidance on the consumer advertising practices of CGI influencers as they become more prevalent or enforcement action is taken.

The USPTO issued an unusual advisory bulletin last week, warning the public of a rash of “unauthorized changes” to active trademark applications and registrations. The bulletin, which can be found here, reveals that the PTO believes these may be part of a potential “scheme to register the marks of others on third-party ‘brand registries.’” What does this mean? There are several non-governmental brand registries designed to allow trademark holders to identify infringing products and better enforce their trademark rights. For example, a trademark holder might register with an online seller’s brand registry, identifying its trademarks based on USPTO records. The brand registry may provide services, such as advanced searching capability that recognizes text or even images, to help the trademark holder identify potentially wrongful use of trademarks, such as sale of products outside a geographic restriction, counterfeit products, or competitors using the trademark without permission to sell their own product. Demonstrating rights in a trademark based on USPTO records is key, because many brand registries require proof of U.S. trademark registration before they will allow the trademark owner to participate in the brand registry. What are these “unauthorized users” changing in trademark applications and registrations? The USPTO doesn’t specifically describe the unauthorized submissions, but provides an enlightening “example” of updating the contact information to a new email address. Presumably, the unauthorized user will direct all communication to himself/herself, perhaps with the design of establishing a basis for claiming trademark rights for a third-party brand registry and excluding others from using the trademark (while protecting its own use). In other words, wrongdoers aren’t satisfied with violating the trademark rights of others; they’re now looking to capture control of the trademark rights for themselves and, presumably, keep anyone else from enforcing the trademark. Fortunately, the USPTO says the instances of unauthorized changes “affect a small percentage of total applications and registrations.” Still, what should a trademark owner do? Quite simply, check your email. The USPTO urges trademark owners to carefully review any email notification of an unexpected change to their application or registration, and reach out to the USPTO if they believe unauthorized changes have been made. So that’s it, folks. Don’t ignore the USPTO notification email among the slew of junk mail you receive every day.

The recent decision of DeLorean v. DeLorean Motor Co. is no doubt significant to the parties as well as attorneys and courts who will cite it in future briefs and decisions. However, it is also important because it demonstrates that the intellectual property rights associated with an iconic product might be much more valuable and long-lived than the product itself, and those rights must be carefully protected. To understand the significance of the rights at issue in DeLorean, we need to briefly travel back to the 1980s. That decade brought to us what should have been the greatest sports car of all time: the DMC 12, more commonly referred to as “the DeLorean.” The DMC 12: According to the calculations of scientist Dr. Emmett Brown, “when this baby hits eight-eight miles per hour…you’re gonna see some serious @!#*.” The DMC 12 was manufactured in the United States from 1981-1983 by John Z. DeLorean’s DeLorean Motor Company. The DMC 12, with its striking gull-wing doors, became an icon of the 1980s when it was most memorably used in the Back to the Future motion pictures where it was converted into a flying, plutonium-powered time machine. Despite its greatness, only 9,000 DMC 12s were ever produced, and the company went bankrupt. The DeLorean as an automobile was a complete flop, but the best years for its intellectual property were still ahead. According to the DeLorean decision, after the failure of the DMC 12 sports car, Mr. DeLorean attempted to monetize the DMC 12’s intellectual property by licensing it to Universal Pictures in March 1989 for use with the wildly successful Back to the Future media franchise. This included the appearance of the automobile, the “DeLorean” name, and the “DMC” logo: In exchange, Universal was required to pay Mr. DeLorean a 5% royalty. Universal did pay the royalty for a while, but at some point it stopped. When Sally DeLorean, widow and administratrix for the Estate of the now deceased Mr. DeLorean, contacted Universal in February 2018 for an accounting of the royalty owed under the agreement, Universal told her that it had been making all of its royalty payments, just not to the Estate. Instead, Universal was now making those same payments to DeLorean Motor Company (Texas) (“DMCT”). Wait, who? That question leads us back to the future, and to the October 12, 2018 DeLorean v. DeLorean Motor Co. (Texas) decision. When Ms. DeLorean learned that DMCT had been accepting the Universal royalty payments which she believed should go to the DeLorean Estate, she filed suit alleging tortious interference and unjust enrichment. A modest logo to counterbalance the gull-wing doors. Unfortunately for Ms. DeLorean, Judge Jose Linares of the U.S. Distrcit Court for the Distrcti of New Jersey dismissed her complaint against DMCT on October 12, 2018. And, she should not have needed a time machine to see this result coming. That is because Ms. DeLorean and DMCT were involved in a separate, earlier lawsuit that ended in a 2014 settlement agreement. In the prior lawsuit, Ms. DeLorean alleged that DMCT had infringed trademarks and trade dress relating to the DMC 12 such as its appearance, its name, its logo, etc. When the parties settled, Ms. DeLorean granted DMCT a covenant not to sue with respect to DMCT’s use of the asserted trademarks and trade dress, and she also acknowledged DMCT’s worldwide rights to use those properties. It is unclear whether Ms. DeLorean forgot about the terms of the 2014 settlement agreement with DMCT or assumed that the settlement agreement had an unstated carve out with respect to the Universal agreement. Regardless, Judge Linares opined that the extensive overlap between the 2014 settlement agreement and the Universal agreement barred Ms. DeLorean’s claims. He declined to let her change history and reclaim rights that she gave away years ago. Whether Ms. DeLorean will appeal this decision and whether she will try to exploit whatever rights she still has in the DeLorean intellectual property, if any, remains to be seen. But, as famed physicist and inventor Dr. Emmett Brown once said:  "Your future hasn’t been written yet. No one’s has. Your future is whatever you make it. So make it a good one."

After a six year legal battle, superstar rapper Shawn Carter (“Jay-Z”) and his former partners Damon “Dame” Dash and Kareem “Biggs” Burke successfully defended their use of Roc-A-Fella Records’ iconic logo. Walker v. Carter, et al. highlights the importance of keeping reliable written records, and paying attention to the statute of limitations in actions brought under the Copyright Act. The case involved allegations by Dwayne Walker Jr. that Jay-Z and his partners (1) breached a 1995 contract that provided Walker with 2% of all royalties earned from sales of merchandise including the logo for a ten year period and (2) infringed Walker’s copyright in the logo. The logo includes a stylistic capital “R” over a circle representing a record album and an offset champagne bottle. The logo was first used on the commercial release of Jay-Z’s 1996 single, Dead Presidents, and although it has gone through several iterations, it has remained essentially the same since the 1996 commercial release of Jay-Z’s first full-length album, Reasonable Doubt. The controversy appears to have ended on October 11, 2018, when the Second Circuit issued a three paragraph Summary Order affirming the District Court’s judgment. To understand the District Court’s rulings, some basic background is warranted. According to Walker, he designed the logo in 1995 with the help of three friends:  Freddie Mack, Kenny Gonzalez, and Flavius “Flavi” Penchon. Specifically, Walker, who admittedly “wasn’t a great illustrator,” enlisted Mack to draw the circle representing the album, because “his things come out straight, circles come out circular.” He asked Flavi to draw the “R” and Kenny to draw the champagne bottle. Walker himself did not draw any part of the Logo, but allegedly directed the compilation of the three elements as follows: The album goes behind this, put the R right here, and drop the champagne bottle a little bit off the album but keep it centered so it kind of, the top of what looks like the middle of a album, and that’s what we did. Walker, Flavi, Kenny, and Mack then met at Kinko’s, where Kenny used tracing paper to transfer the three elements onto one piece of paper. They made a copy of the traced version and discarded the original drawings and the traced version. Walker claims the men presented the logo to Jay-Z’s partner Dash, who approved of the design. Several days later, Walker claims, he and Dash shook on an agreement in which Walker was to receive two percent royalties, “for the next ten years after the first year of use, as well as $3500 up front.” A few days later Dash paid Walker the $3500 and Walker wrote out the agreement on a blank piece of paper: I hereby Dwayne Walker received $3500 as partial payment for creating the Roc-A-Fella logo in execution of Damon Dash as chief executive officer of Rock-A-Fella Records in which it’s agreed if the logo is used after the first year two percent for the next 10 years will be payable to Dwayne Walker. Walker and Dash allegedly signed the agreement with Walker keeping the only copy and Dash keeping the only copy of the logo. Walker claims that the agreement was subsequently lost in 1998 when his family members cleared out the apartment he had formerly shared with his uncle. In April 2010, Walker filed a copyright registration for the logo. The deposit copy was not the original drawing, but instead was a reconstruction—a friend of Walker’s took a photograph of the logo, “extracted it” and “touched it up” by adding “a black box outline.” Walker listed himself as the “author” of the logo design and listed it as “Made for hire.” At his deposition, however, Walker said that none of the men who drafted the logo worked for him and that he signed no documents with them regarding ownership. Jay-Z and his partners disputed Walker’s account in its entirety. They claimed that the logo was created by Adrien Vargas, who was hired as Roc-A-Fella’s Art Director in 1995. Vargas was credited with “Design” and “Art Direction” on the commercial releases of Dead Presidents and Reasonable Doubt, respectively. Roc-A-Fella filed for a trademark registration of the logo on December 3, 1996. Jay-Z and his partners disputed there was ever any agreement for royalties to Walker. Breach of Contract Because the alleged agreement between Walker and Dash had been lost in 1998, New York’s Statute of Frauds required Walker to rely on parol evidence to establish its existence. The court treated Walker’s parol evidence with great skepticism, noting: [Walker] does not present evidence of the existence of the writing sufficient to create a triable issue of material fact. Defendants do not admit the existence of the writing. And the testimony presented by Plaintiff of the alleged writing is alternately contradictory, self-serving, and not based on first-hand knowledge. Plaintiff can present no witnesses to the signing of the agreement, as by his own account, only he and Dash were present with it was drafted and signed. The court then highlighted the contradictory and self-serving nature of the testimony, and granted Jay-Z and his partners’ motion for summary judgment on the contract claim. Copyright Infringement Jay-Z and his partners also moved for summary judgment on Walker’s copyright claim, arguing that the claim was a copyright ownership claim rather than a copyright infringement claim, and was thus barred by the three year statute of limitations. Unlike an infringement claim, which can be ongoing in nature, an ownership claim accrues only once—“when a reasonably diligent plaintiff would have been put on inquiry as the existence of a right.” The court began by detailing the overwhelming evidence indicating that Walker’s claim was an ownership claim rather than an infringement claim, stating: All parties have presented ample evidence that, at the very least, third parties have colorable claims of ownership. For instance, Adrien Vargas testified at length regarding his alleged creation of the Logo. And on the other side, Plaintiff and his witnesses testified that at least three other individuals had a hand in creating the Logo—and that Dash described to Plaintiff the general concept. All of this points to a genuine dispute over both the authorship and the ownership of the Logo. Once the court determined that the claim was one of ownership, rather than infringement, it addressed the issue of accrual. The court found, drawing all inferences in favor of Walker, that the latest possible date the ownership claim could have accrued was 2007, the latest possible end-date of the purported contract. At the end of the alleged contract, Walker would have been owed millions of dollars in royalty payments that he did not receive, putting him on notice of the dispute. Because the suit was not filed until 2012, well more than three years after the claim accrued, Jay-Z and his partners’ motion for summary judgment on the copyright claim was also granted.

Two recent decisions of the Federal Court of Canada pave the way for U.S. and other non-Canadian businesses to secure and maintain trademark rights for their retail or hotel operations even where they do not have a bricks and mortar presence in Canada. In the first decision, Dollar General Corporation v. 2900319 Canada Inc., 2018 FC 788, which came out in July, the Federal Court of Canada overturned a decision of the Registrar to expunge Dollar General's trademark registration for its DOLLAR GENERAL house mark for retail variety store services for non-use.  Dollar General has a chain of retail stores and makes direct ecommerce sales in the U.S.  But Dollar General doesn't have any stores in Canada and doesn't ship directly to Canadian customers either.  The only “service” that Canadians could access was Dollar General's website or app which has product and store information, and recipes and coupons.  They could also make purchases online but only by shipping to the U.S. or paying a third-party shipping agent to bring those purchases to Canada. The Registrar had found that Dollar General was not using its mark for its variety store services because purchases could only be made in the U.S. or through a shipping agent.  But on appeal, the Federal Court adopted a more liberal view as to "use" and found that Dollar General's ancillary interactions with Canadians through its website were enough to allow it to maintain its retail store service trademark rights. The second decision, Hilton Worldwide Holding LLP v Miller Thomson LLP, 2018 FC 895, came out just two months later.  Here, Hilton owned a Canadian registration for its WALDORF-ASTORIA mark for its exclusive hotel services.  Following a non-use challenge, the registration had been expunged because Hilton did not have a physical hotel location in Canada.  Instead, Hilton operated a branded interactive website, a worldwide registration service, customer offers and discounts, and a loyalty program, all of which were accessible by Canadians. Hilton appealed the decision to expunge. Similar to Dollar General, the Federal Court of Canada found that the type of ancillary services Hilton was engaging in with its Canadian customers was enough to demonstrate use of its mark for hotels. This liberal interpretation of "use" of a trademark for services confirms that U.S. and other non-Canadian businesses have broader latitude to gain and maintain trademark rights for retail and hotel services in Canada even if they don't have a physical presence there, and they are only offering ancillary or incidental services.  While each case will ultimately turn on its facts, online interactivity with Canadians through a website or app is generally a sign that services are being rendered in Canada under current law.